Question
5. (TCO H) Simpson Company manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 20,000
5.(TCO H) Simpson Company manufactures and sells trophies for winners of athletic and other events. Its manufacturing plant has the capacity to produce 20,000 trophies each month; current monthly production is 19,100 trophies. The company normally charges $42 per trophy. Cost data for the current level of production are shown below.
Variable Costs |
Direct Materials | $270,940 |
Direct Labor | $96,900 |
Selling and Administrative | $20,550 |
Fixed Costs |
Manufacturing | $125,000 |
Selling and Administrative | $75,000 |
The company has just received a special one-time order for 800 trophies at $30 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
Required:
Should the company accept this special order? Provide numerical support for your decision.(Points : 15)
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